With SME loans interest rates at an all-time low, loan restructuring may save businesses from going bust.
The first day of May, also known as May Day, is widely commemorated around the world as Labour Day, a day traditionally dedicated to the celebration of the working class. Ironically, the phrase Mayday – when uttered three times – is also universally used as a distress call, which is what many business owners are crying out loud during these extraordinary times brought about by the COVID-19 pandemic.
As we can see, one man’s celebration can be another’s distress. For so long, workers and employers are perceived to be on opposite sides of the fence, that notion augmented by the numerous failed negotiations over collective bargain agreements and subsequent strikes seen all over the world. But, regardless of the grouses a worker might have on a company, wishing his or her employers the worst now with a “Hah, you deserve it” is largely counter-productive, as workers’ livelihoods are very much at stake.
Workers and employers need no reminder that they are actually all in the same boat. One simply can’t do without the other and their fates are tightly intertwined amid the COVID-19 storm. Employers have workers to thank for productivity that generates profit for survival, while workers have employers to thank for keeping them employed. Both should be grateful to each other.
Workers also need to recognise they now form part of business owners’ problems. In the face of economic headwinds, companies are facing tough challenges owing to the acute dip in revenue brought about by the pandemic. The challenges include:
- Project/order cancellations
- Buyers not paying on time
- Suppliers chasing payments
- Continuous staff costs
On their part, the Singapore Government has rolled out several support schemes for employers to keep their businesses going, with officials painstakingly urging companies to refrain from retrenching workers. Saving jobs, after all, is the key to a swift economic recovery.
But business owners are still facing hard decisions. So, should you push on and bear the brunt of costs and losses just to keep your workers employed; or should you cut your losses and call it a day? Here are some factors to consider:
BAD TIMES WON’T LAST
While we have no idea when exactly will COVID-19 blow over, signs are clear that the situation is well under control and good times are on the horizon. And, by the survival of the fittest, businesses that weren’t doing well before the pandemic would have already been eliminated through attrition. What does that leave the survivors? Fewer competitors and a bigger slice of the market. If you can stay the course, you will need your workers with you to reap the fruits. An easing of cashflow through borrowing will allow you to keep your workers to fight another day.
But many companies are reluctant to take on a loan because of the risk that they may go bust if they can’t repay the debt. However, with interest rates at an unprecedented low, smart business owners should use that to their advantage. Even if your business did not need the cash, you should borrow lower-interest loans to clear off past debts of higher interest. You will be surprised at how much money you stand to save.
Having said that, not every business automatically quality for bank loans. The application can be a hassle, while documents must be in good order before you even stand a chance. And some business owners lack the financial literacy to maneuver past the paperwork. This is where Beacon Financial Services come in.
At Beacon, we have developed a proprietary system that can assess your financial documents and provide you the recommended loan amount, interest rates, and tenor, so that you have full clarity.
Beacon has also developed a longstanding partnership with the banks, who are committed to processing our applications faster. Processing fees are also waived and interest rates lowered. These are perks that you don’t get if you decide to apply for the loan on your own.
In April alone, we have helped more than 100 SMEs plan out their cash flow to ride out their challenges brought about by the pandemic.
But business owners will need to help us to help yourself. Start preparing the following documents to speed up your application process:
- Latest Notice of Assessment and IC of ALL directors and shareholder
- All operating bank statements for the last 6 months
- Financial statements for the last 2 years
- Business Registration / ACRA
It’s still not too late to call out “Mayday, Mayday, Mayday”. We, at Beacon, will come to your rescue and help you ride out this storm.
Author: Lenny Lim, Executive Director, Beacon Financial Services Pte Ltd